Raises by Democracy

If there's any piece of information that most CEOs try to keep secret, it's how much everyone makes. But imagine a business in which workers not only know one another's pay rate but actually vote on what that rate should be. Jim Larkin, CEO of Romac Industries, a waterworks-manufacturing company in Seattle that employs some 300 people, makes all his hourly workers' pay rates public and even subjects them to open debate.

This is not some recent experiment. The policy has been in place since 1974. Larkin believes it's a matter of acknowledging reality. "The worst-kept secret in any plant is what people make," he says. "Everybody ends up finding out anyway, so we just post it."

Whenever an hourly employee wants a raise, his or her name, current pay rate, requested wage increase, and picture go up on the company bulletin board. The other hourly workers vote by secret ballot--on a zero-to-100% scale--about how much of that raise they think the person deserves. "We probably have someone's picture on the board every week," says Larkin. "You can get a raise every month if people vote for you."

Sure, but what if nobody likes you? Larkin says he has heard that "popularity contest" objection many times. He answers that there's nothing wrong with giving employees a reason to get along better with their coworkers. Still, employees who are more popular sometimes do benefit from favoritism. "We have some people who've received raises, and management questions the decision," says Larkin. "But those are rare. Overall, it works out pretty close to what the managers would have done anyway."

The raises-for-votes policy has evolved since its inception, with the company and the employees making changes based on feedback from company surveys. For example, the vote used to be just yes or no: raise or no raise. But people wanted the ability to give partial raises. And, interestingly enough, as the company grew, and people in different departments didn't necessarily know one another, employees began asking for management input on the raise issue. "People wanted an idea of what the guy's foreman thought," he says. "So now foremen make recommendations, but employees don't have to listen."